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May 12, 2010

Maersk back in black

The A.P. Moller-Maersk Group has released first quarter 2010 results that show a profit of $639 million for the January 1 to March 31 period, compared to a loss of $373 million in the same period of 2009.

"Markets have improved, and our efforts are paying off. We expect an improved result compared to earlier expectations of a modest profit, mainly because of the recovery in our container business, which is now expected to post a profit in 2010. Due to the development in the global economy, especially in the second half of the year, there is still uncertainty in how the volumes and the rates will develop the rest of the year. But we will continue to improve our competitiveness, and we are ready to seize opportunities that arise in the wake of the crisis," says CEO Nils S. Andersen.

During the first three months of 2010, says Maersk, the container shipping market was positively affected by higher volumes and better rates compared to the same period of 2009. The growth in activity was partly related to general restocking in the U.S. and Europe.

Considerable rate increases and reasonable volume coverage were achieved in contract negotiations

On Transpacific routes. the Group achieved higher coverage of fluctuations in fuel prices through surcharges.

Average oil price was $76 per barrel in the first quarter of 2010, compared to $45 per barrel in the first quarter of 2009. The Group's share of oil and gas production in the first quarter 2010 was 20 percent below the first quarter of 2009, mainly due to a lower share in Qatar. The result in the first quarter was positively affected by lower exploration costs than in the same period of 2009.

Rates for Maersk Tankers' carriers in the first quarter were lower than in the same period of 2009. The markets for the Group's offshore activities saw increasing activity, but the addition of new tonnage led to continued pressure on rates. Tankers, offshore and other shipping activities were negatively affected by impairment losses of $75 million on LNG carriers.

The Group is keeping a strong focus on reducing costs, and further cost-cutting initiatives have been launched in 2010.

Outlook for the full year 2010

The Group's container shipping and related activities are now expecting a positive result for 2010 based on the improved market conditions for container shipping activities.

The Group's share of the daily oil and gas production for 2010 is expected to be somewhat below that of 2009, primarily due to a lower share in Qatar, and slightly below the first quarter in 2010, primarily due to planned maintenance in Denmark and Great Britain. Acquired exploration rights in Brazil as well as a general increased exploration activity in the remaining part of the year, in the USA (Gulf of Mexico) and Great Britain among others, are expected to entail increased exploration costs in 2010 at a significantly higher level than 2009 and most significantly in the second half year. The lower share of the daily oil and gas production as well as the considerably higher exploration costs in the remaining part of 2010 will entail that results for the oil and gas activities for the next three quarters are expected to be below the first quarter 2010.

Overall expectations for the A.P. Moller - Maersk Group are thus a profit for 2010 -- an improvement on the March 2010 projection of a "modest" profit.

Cash flow from operating activities is expected to be significantly above that of 2009, butcash flow used for capital expenditure is expected to be significantly below -unchanged compared to previous statement.

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